An AMD Turnaround? Not According to NVIDIA's Earnings

NVIDIA reported strong revenue and earnings growth for its first quarter, with gaming GPUs showing strength. While AMD has reported strong demand for its graphics products, it doesn't seem to be affecting NVIDIA at all.

May 14, 2014 at 12:05PM

While Advanced Micro Devices (NASDAQ:AMD) reported strong demand for its GPUs during its last earnings conference call, NVIDIA's (NASDAQ:NVDA) earnings results throw cold water on the idea that AMD is regaining any considerable market share. NVIDIA released preliminary results two days early showing a 16% rise in revenue and an 85% jump in EPS. But its full results paint a picture of a company completely unaffected by AMD's turnaround efforts.

Strong growth continues for NVIDIA
NVIDIA's GPU revenue, which is comprised of both GPUs for the PC as well as the company's enterprise offerings, rose 14% year over year during the first quarter. GeForce GTX gaming GPUs grew by 57% year over year, faster than the 50% growth during the fourth quarter. High-end notebook GPUs performed well even as the underlying notebook market declined. NVIDIA launched Maxwell-based notebook GPUs during the first quarter, and an increase in energy efficiency -- combined with substantial gains in performance -- gave NVIDIA an edge over competing products.

AMD reports its GPU business along with its console business, and the company didn't give detailed numbers on GPUs alone. But with NVIDIA's reported growth, it's hard to imagine AMD picking up meaningful market share.

One area where AMD claimed to be winning market share was the professional graphics market, but NVIDIA's results cast some doubt over those claims. NVIDIA's Quadro line of professional graphics cards grew during the quarter, and NVIDIA claimed in its conference call that its workstation market share is at its highest point since 2010. There is certainly a margin of error here, but it's safe to say that if AMD picked up market share during the quarter, it wasn't very meaningful.

Of course, AMD is in the early stages of its turnaround, and while growth in the gaming and professional GPU markets can drive growth at both AMD and NVIDIA, it doesn't appear that AMD's efforts have made a dent in NVIDIA's market share. NVIDIA's sole focus on graphics -- contrasted with AMD's attention being spread between CPUs, GPUs, semi-custom deals, and servers -- gives reason to believe that NVIDIA will remain the market leader for the foreseeable future.

Beyond gaming
NVIDIA's enterprise products, namely Tesla and GRID, also grew during the quarter. GRID, NVIDIA's graphics virtualization platform, is now being trialed by nearly 600 enterprise customers, a number which is up 35% since the fourth quarter. While GRID is a very small part of NVIDIA's business today, in part due to the typical trial period of six to nine months, CEO Jen-Hsun Huang expects GRID's growth to accelerate going forward.

Tesla, NVIDIA's GPU that's aimed at the supercomputing market, also has plenty of potential for further growth. While the high-performance computing market has been the main aim of Tesla so far, the rise of big data has presented further opportunity for the Tesla business to grow. Because big-data analytics calculations are easily parallelized, GPUs are a natural fit to accelerate these types of calculations. NVIDIA announced a partnership with IBM late last year that put NVIDIA's Tesla hardware inside of IBM's servers in order to accelerate its enterprise software, and with IBM increasingly focusing on big data, NVIDIA's Tesla is at the doorstep of a whole new market.

Tegra, NVIDIA's mobile product that has been responsible for the company's declining earnings in recent years, saw its third quarter of sequential growth, as demand from the automobile market boosted revenue by 35% year over year. CEO Huang seemed very confident during the conference call about the potential of the Tegra K1, the newest iteration of the mobile processor. With a narrow focus on getting the chip into devices where graphics and visual computing matter, Tegra is on its way to eventually becoming profitable.

The bottom line
While AMD's recent results suggest that things are going well for its GPU business, it doesn't appear that NVIDIA is being negatively affected at all. In both gaming GPUs and professional GPUs, NVIDIA grew revenue, and it's unclear if AMD managed to pick up any market share. NVIDIA's enterprise and mobile products also grew, and the 85% increase in EPS was at least partly driven by smaller losses in the Tegra division. NVIDIA had another strong quarter, and it doesn't look like this trend will change anytime soon.

Don't miss this trillion dollar opportunity
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Timothy Green owns shares of Nvidia. The Motley Fool recommends Nvidia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers